Hopes and aspirations for 2018

Business leaders from various sectors share their expectations about the economy in the new year

As the country welcomes the New Year, there are positive vibes in the economy owing to the rise in crude oil prices. The price crossed US$65 in December, leading to the firm belief among economists and the business fraternity alike that the hardships of the past couple of years will be abating in 2018. The confidence is evident across all the sectors. BusinessToday has garnered views from representatives from major sectors in Oman's economy – oil & gas, banking, shipping and logistics, automobile, real estate plus travel and tourism – and the general feeling is that of confidence about a turnaround in the economy in 2018

Raul Restucci

MD, Petroleum Development Oman

Notwithstanding recent oil price increases, Oman is projecting sustained fiscal and current account deficits and PDO will need to perform as proficiently as ever , further stepping up its efforts to realise increased revenue generation.

Simply put, this means raising the bar and becoming more effective and efficient at everything we do. It also means, creatively pursuing new value streams by deploying our competitive advantage – our human capital.

We will continue our drive for the early monetisation and production of low unit technical cost prospects while maintaining our overarching focus on personal and process safety as we strive for Goal Zero – no harm to our people, our environment and our assets. We will continue to add reserves to more than replace every produced barrel and continue to increase system uptimes and reliability across all of oil and gas assets.

We must also continue to identify savings and cost reductions across the full spectrum of our operations while leveraging strategic partnerships for project procurement and delivery excellence.

I am optimistic that we have the right people, the focus, the one team approach in place to meet these goals. Our staff have performed brilliantly in the low oil price environment and have seized the opportunity to drive change from exploration through to abandonment.

There are many areas where this is happening. For example, our Well Engineering Directorate is now making in excess of 20,000 interventions a year, double the number from 2012, but with the same level of resources, and we are now hooking up discoveries so quickly and efficiently that our Exploration Directorate fully pays its way within the same year of expenditure.

Another area where truly big things are happening is with our Lean business efficiency programme which we launched to eliminate waste and streamline our processes. This has now generated US$1.2bn in terms of additional value, cost reduction and avoidance, but – above all – it is empowering our people to drive and pursue continuous improvement as a way of life.

At the same time, we will deepen our collaboration with our contractors through our very successful Contract Optimisation Reviews to identify those areas where we can work together more safely and productively and all parties win.

PDO is constantly evolving and we must be ready to cope with, if not embrace, the huge economic, social, technological and energy challenges and changes that are transforming our world. The fourth Industrial Revolution, as so well described by Klaus Schwab, founder and chairman of the World Economic Forum, is upon us. The velocity of change is exponential and unrelenting. Whilst we recognise the threats and challenges to established operating paradigms and gaps in newly required capabilities, we are very excited and are embracing change by increasing our ability and speed to adapt. We are doing this by constantly re-assessing our development needs, by supporting multi-stakeholder collaboration, and by the proficient deployment of new technologies, data and analytics, with increasingly pervasive and growing interconnections. Within production alone, we process more than one billion data signals per day and our systems are increasingly able to find improvement opportunities, so that our engineers can focus on realising them.

Beyond the challenges of current mega-trends ranging from the Internet of Things, through to blockchain and digital ecosystems, and as climate change realities dawn on everyone, it is clear that we need to also gradually move away from a dependence on fossil fuels. This means developing a roadmap where we seamlessly transition to a fully fledged energy company – Energy Development Oman – with a greater emphasis on renewables, especially solar, where the potential in Oman is huge.

You will also see PDO aiming to leverage its expertise beyond Block 6 across both Oman and regionally in services ranging from enhanced oil recovery, engineering and design and well, reservoir and facilities management. And that’s just the start. We will also work for a more aligned research and development partnership with academia, industry and government through a new digital platform, developed by, and with the great support and collaboration of the Technology Research Council (TRC) to raise Omani technical capabilities and develop Omani solutions to Omani challenges.

Last but not least, the roll-out of sustainable and diversified In-Country Value programmes and initiatives will continue to ensure Omani employment and skills levels are raised, both in the oil and gas sector and beyond our natural boundaries in other industries.

We will also ramp up our support for Omani entrepreneurs to boost the sultanate’s SME sector and help spur the greater diversification of the national economy through the Government’s excellent Tanfeedh initiative.

Notwithstanding the daunting challenges, PDO is looking forward to 2018 and to making our mark, by doing, by learning, by adapting and consistently striving to exceed societal expectations. Through all this change, one theme remains constant - the country can rest assured that everyone at PDO remains ready and proud to serve Oman to the best of their ability.

Abdul Hakeem al Ojaili

Acting CEO, BankDhofar

BankDhofar believes that providing best banking experience contributes to building a growing loyal customer base, fostering business as well as gaining a good reputation in the market. Since our inception, we spared no effort to be the bank of choice for an ever-growing portfolio of customers in all segments; whilst at the same time offering a broad range of best-in-class services and state-of-the-art products. With the aim of simplifying processes and speeding up processing time, the bank is working on the lean operating model for the organization which would drive the banks towards achieving its ultimate objective of building an excellent customer experience.

On the other hand, stemming from its belief that staff are ambassadors of the brand, BankDhofar has developed programs and projects which fall within the transformation journey Together 2020. The bank continued to innovate staff learning and development programs across all business functions. Individual and team performance and contributions have resulted in achieving consistent overall performance which has been recognized locally, regionally and internationally winning a number of prestigious awards.

Overview of 2017 & way forward for 2018

Due to the overall rise in interest rates and tightening liquidity conditions which resulted in slowdown of the economy, the banking sector faced challenges in overall credit growth triggering prudent lending strategy. BankDhofar, however; strived its best to achieve favourable results by focusing on diversifying its pool of income and exploring various alternatives for generating income through reducing reliance on interest income.

Potential areas of growth

The banking sector continued exercising its core business of lending with special attention to quality over quantity achieving desired margins and profitability. Given the current economic cycle and impact on the overall economy which will eventually extend its effect to the banking sector, the sector is navigating various routes and strategies for enhancing the overall business and achieve targeted growth objectives ensuring safeguarding its stakeholders' interest.

At BankDhofar, we believe that our customers, be it individuals or corporates, are the core of our business growth, therefore we focus on providing leading products and services. We continue our commitment to offer innovative, competitive and convenient services for customers. Earlier this year, BankDhofar launched its corporate credit card and the exclusive credit cards that are customised for small and medium-sized enterprises (SMEs). Additionally, as part of its endeavour to provide easy e-payment solutions, BankDhofar signed Cards Merchant Acquiring agreement with Al Maha Petroleum Products Marketing Company. BankDhofar’s Islamic window – Maisarah Islamic Banking Services – implemented the instant debit card issue service in line with its objective of enhancing customer experience. Additionally, BankDhofar provides its customers through its mobile banking application simple and less costly solutions. The mobile banking application enables our customers to complete transactions at the palm of their hands, with a number of features including card-less cash and instant transfer.

MC Jose

CEO, Khimji Ramdas Projects and Logistics Group

We have sailed through 2017 without getting hurt and we are optimistic about the coming year.

Our navy and ferry business remained more or less the same in 2017,but the cruise business saw a marginal increase. Freight forwarding business too was low in the first quarter but it was compensated by the surge in volume with Doha traffic through Oman. We have started seeing improvements in bulk mineral exports and tanker volume. We recently ventured into project movement and undertook freight management services for heavy lifts and out of gauge cargo for the oil and energy sector, including two rigs of Petroleum Development Oman from Jebel Ali port to the site.

We also conducted a heavy lift conference in 2017 which attracted operators in this sector from across the world, which has helped Oman leverage for itself, a reputed position in heavy lift and project management sector.

For the travel division, it was a challenging year overall, as business travel saw a general slowdown due to revised travel policies. Leisure travel inbound and outbound has been steady and 2018 looks promising. Our insurance broking division with a newly inducted team has doubled the volume this year and we expect steady growth next year also.

2018 looks very promising as there will a large movement of cargo for Duqm refinery and related projects. With the government announcing new projects, we can expect cargo volumes to rise from Sohar and Salalah ports as well.

Ahmed al Barwani

Head of Office, Al Tamimi and Co

With the crude oil price remaining the main driver for Oman economy the continuance rise of its price over US$60 per barrel would, together with the completion of the infrastructure projects, particularly, the network of roads connecting main commercial cities with the completion of Muscat International Airport, drive and accelerate the size of investment in Oman by foreign and local investors. Oman government, through completion of the infrastructure projects and development of commercial cities and free zones like Sohar, Duqm and Salalah, has paved the way for private sector to play a bigger role in the development of Oman economy. Historically Oman government was the main player in Oman market through award of projects to international companies to invest in Oman. This role, although will remain to some extent, will diminish in 2018 onwards with the aim of achieving a sustainable economy away from oil and giving more room for foreign investors to deal with companies operating in private sector.

The neutral position which Oman has played in the regional and international conflicts has ensured that its land is immune and safe place for investment. This has already started in 2017 through number of companies shifting from regional jurisdictions to Oman in order to run its operations smoothly and can transfer its funds without any restriction.

This trend will continue in 2018 onwards given the political and economical stability which Oman has which the investors around the globe are looking for in one of the areas which has biggest oil reserves, taking into consideration the geographical location of Sultanate of Oman in the Southeastern coast of the Arabian Peninsula with all of its main ports and dry-dock overseeing Indian ocean which make them safe hubs for any goods or shipments to be loaded or ships to be serviced.

Parallel to the increase in the oil prices and the political stability enjoyed by Oman, number of key laws have been reconsidered like Foreign Capital Investment Law which would, once issued, permit for better ownership and control of companies to be formed in Oman with the local investors. It is envisaged that 100 per cent shareholding ownership will be permitted by foreign investors in some sectors like industry and tourism once the law is officially issued. Legislative process has been amended through issuance of Royal Decree 99/2011 which gives Shura and the State Councils the right to review any draft laws and commenting on the same ensuring greater transparency and reflection of the interests of both the national and international players in Oman market.

Another key law to be mentioned in this context which would further encourage foreign investment in Oman and ensure foreign investors exercising better and direct control through their investments is ministerial decision number 95/2017 issued by Minster responsible for the Ministry of Housing, which regulates the conditions of ownership in real estate investment funds (OREIF) which came to force on 16 November 2017.

OREIF will be regulated and licensed by the Capital Market Authority, and will take the form of a closed fund with fixed share capital. OREIF may own properties necessary for the conduct of its licensed activities.

David Aziz

CEO, Mohsin Haider Darwish Automotive

From what seems to have been a non ending downward spiral of economic woes across the crude oil producing nations, there are indications that recovery is on the way.

Oil’s earlier price decline, which started in 2014, forced Russia and Saudi Arabia to tighten their belts and led to unrest in some producing countries including Venezuela and Nigeria. This led OPEC and non-members led by Russia to agree for cuts in oil output till March 2018 as they battled a global glut of crude after seeing prices halve and revenues drop sharply in the past three years. OPEC’s cuts have helped to push oil back above US$50 a barrel this year, giving a fiscal boost to producers, many of which rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets.

With OPEC’s measures taking effect and further expectations of the cuts being extended to December 2018 have led to oil prices strengthening further to US$63 as 2017 comes to an end.

One of the biggest effect of the oil woes was on the automotive market in the Middle East. New car sales in the Sultanate of Oman were also hit by the market correction.

However the gloom is now lifting with the prospects of a healthy government budget in 2018. According to a growth projection by the International Monetary Fund, the gross domestic product of Oman is expected to grow at more than 3.8 per cent in 2018, thanks to economic diversification programmes and prudent policies of the government. According to the Central Bank of Oman the budget deficit for the first seven months (January-July) of 2017 stood much lower at RO2.5bn, compared to RO4bn for the same period of 2016.

Buoyed by this positive trend the automotive division of Mohsin Haider Darwish has been investing heavily in upgrading its Jaguar Land Rover Sales/ Service & Spares facilities as per the manufacturer’s latest CI standards in the Sultanate of Oman. While the Salalah facility has been fully renovated and launched in January 2017, work is on in full earnest at the Muscat facility with the launch planned in the first quarter of 2018.

On the product front also the Jaguar Land Rover brands have been busy with new product introductions. While the all new Range Rover Velar has arrived in the fourth quarter of 2017, the first quarter of 2018 will see ultimate excitement with the arrival of the 2018 Model Year Range Rover Vogue, Range Rover Sport and the Jaguar E PACE – Jaguar’s first compact SUV in a unique combination of looks, agility & dynamic driving.

All the new products are also supported with strong service & warranty packages to bring down the cost of ownership. The state of the art service facility currently being worked upon in Muscat will also add to the customer confidence. With outlooks for 2018 staying positive, the road ahead looks clear for the automotive industry in the Sultanate of Oman.

Benjamin Cullum

General manager, Hamptons

It is in a state of cautious optimism that the real estate sector looks forward to 2018. The last 18 months have been particularly challenging as the general effects of sustained reductions in oil price have bitten deep into the economy. Over that period we have witnessed widespread reductions in demand as both companies and individuals have collectively tightened their belts in combination with a continual increase in supply. This has led to well documented reductions in rents and capital values across all sectors.

Despite having breached the US$50 a barrel mark consistently throughout 2017 and now having been in excess of US$60 for the last month, oil price is notoriously volatile and can be affected by a variety of external events. There is certainly hopes that such oil price levels can be sustained, if not improved, throughout 2018, but whether such hope will be seen to be unfounded or not, only time will tell.

Mohamed Ahmed

CEO, SalamAir

The tourism and aviation industries continued to enjoy robust growth and achieved solid results over the past year, despite the challenges posed by low oil prices. This was not the case in the aviation industry as the drop in oil prices has actually helped airline operators save money when it comes to fuel consumption resulting in more competitive prices for travelers.

In addition to oil prices, there are other micro- and macro-economic factors that have influenced the performance trends in the aviation industry. Ongoing investments in the tourism and hospitality sector are bound to attract more travelers to destinations, which prompts the use air travel as a convenient alternative. Careful fiscal planning including budget allocation and increased economic activity are key factors in boosting the local economy directly and generating demand in the aviation sector. The completion of major infrastructural projects, such as the new terminal at the Muscat International Airport, will add value to the local economy, increase handling capacities, and provide improved operational efficiencies.

Forecasts at the beginning of 2017 predicted that the aviation industry in our region would become one the fastest-growing in the world in terms of air traffic and passenger flow, for both business and leisure. Looking back, those projections have been realised even with the challenging market conditions. Perhaps a good witness to this is seeing the establishment of several new airlines in the region, especially when it comes to adopting the low-cost carrier business model. With oil prices on the rise, consumer confidence levels are expected to improve and growth rates in the aviation industry are expected to surge.

Christian Baudat

Area GM, Abu Dhabi, Al Ain & Oman, Rotana Group

2017 was a momentous year for the Rotana Hotel Management Corporation. We celebrated our 25th anniversary and added a number of achievements to our portfolio. In this year, we took our hotel count to 55 operating properties in 21 cities across 13 countries in the Middle East, Africa and Turkey. Establishing a foothold in the Omani capital, Muscat, became a reality with the opening of the Sundus Rotana in October. As we turn the page on this year, we have set a number of ambitious goals for Sundus Rotana in 2018.

Like any new property, Sundus Rotana’s current objective is to expand its customer base and increase occupancy levels by introducing facilities that connect our guests to

Muscat. That includes the opening of Teatro, an award-winning concept restaurant that combines Eastern cooking with Western cuisine. Serving Thai, Chinese, Japanese Sushi, Indian and Italian menus in a great atmosphere, Teatro is set to deliver a holistic dining experience to travellers and residents alike.

Drawing on the brand’s expertise, we’ve mapped out the property’s future with more employment opportunities for Omanis as well as the introduction of new award-winning services that will raise our contribution to the sultanate’s 2040 tourism strategy. To that end, we are already making headway raising Omanisation levels, nurturing the growth of high-potential Omanis, and creating a pool of hospitality professionals who will support the industry’s development.

We also anticipate a surge in traffic when the new Muscat International Airport is opened in early 2018. The upcoming terminal will further unlock Oman’s tourism value and lead to an increase in visitor numbers. Such an infrastructural milestone will boost traffic to successful events such as the NBO Golf Classic Grand Final, the Marathon, Tour of Oman, etc. which we will be prepared to accommodate. Our strategy will focus on cementing Sundus Rotana’s position as the ideal host in the Omani market through debuting compelling concepts and creating the perfect experiences for our guests.